Correlation Between Parke Bancorp and First Business
Can any of the company-specific risk be diversified away by investing in both Parke Bancorp and First Business at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Parke Bancorp and First Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parke Bancorp and First Business Financial, you can compare the effects of market volatilities on Parke Bancorp and First Business and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Parke Bancorp with a short position of First Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parke Bancorp and First Business.
Diversification Opportunities for Parke Bancorp and First Business
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Parke and First is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Parke Bancorp and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business Financial and Parke Bancorp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Parke Bancorp are associated (or correlated) with First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of Parke Bancorp i.e., Parke Bancorp and First Business go up and down completely randomly.
Pair Corralation between Parke Bancorp and First Business
Given the investment horizon of 90 days Parke Bancorp is expected to generate 3.4 times less return on investment than First Business. But when comparing it to its historical volatility, Parke Bancorp is 1.02 times less risky than First Business. It trades about 0.02 of its potential returns per unit of risk. First Business Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,441 in First Business Financial on November 9, 2024 and sell it today you would earn a total of 2,194 from holding First Business Financial or generate 63.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parke Bancorp vs. First Business Financial
Performance |
| Timeline |
| Parke Bancorp |
| First Business Financial |
Parke Bancorp and First Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Parke Bancorp and First Business
The main advantage of trading using opposite Parke Bancorp and First Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parke Bancorp position performs unexpectedly, First Business can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Business will offset losses from the drop in First Business' long position.| Parke Bancorp vs. Sound Financial Bancorp | Parke Bancorp vs. Finward Bancorp | Parke Bancorp vs. Franklin Financial Services | Parke Bancorp vs. Community West Bancshares |
| First Business vs. Home Federal Bancorp | First Business vs. Lake Shore Bancorp | First Business vs. Old Point Financial | First Business vs. Parke Bancorp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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